DWP loses £2.5bn to fraud and errors

IT fails to alleviate loss

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About £2.5bn was lost to fraud and error in benefit payments over the last year, according to the National Audit Office (NAO).

The figure is down from £2.7bn over the Department for Work and Pensions' (DWP) previous financial year, but was still deemed too high for the NAO. Consequently, the watchdog refused to sign off the accounts – the 18th consecutive year in which this has happened.

Publishing the report, DWP Resource Accounts 2006-07, NAO head Sir John Bourn said: "Once again I have had to qualify my opinion on the DWP accounts because of the significant sums lost to fraud and error: 2.5bn or 2.1 per cent in the last year."

The report identifies limited IT integration as one reason for the high level of error, as well as complex benefits rules, poor business process design and human mistakes.

However, Bourn accepted that progress had been made in introducing new systems and procedures to reduce fraud and error and improve the recording of identified debts.

The report acknowledges a number of anti-fraud initiatives adopted by the DWP, including advanced data matching and comparing data from government and external sources.

It adds: "There are plans to further develop data matching using advanced IT systems, which will allow more timely identification of fraud and error and, in particular, help to target organised fraud rings."

In 2005, the DWP introduced its Debt Manager IT system to help cleanse data and put in place processes to support the valuation of overpayment debts recorded in its balance sheet.

Commenting on this project, Bourn remarked: "Work by my staff has confirmed that this has been done well and provides a sound basis for the future."